Document: Delucca v. KKAT Management, LLC, C.A. No. 1384 (January 23, 2006)
A manager of an LLC, in a group of LLCs operating as structured investment funds, sought advancement of legal fees to defend an action her former employer brought against her for breach of fiduciary duties. The defendant companies responded that the action against the manager did not implicate the advancement provision. The Court granted the plaintiff relief on both the claims for advancement and fees-on-fees.
Defendants argued that the manager had primarily harmed the LLC that employed her, rather than the group of LLCs as a whole, so the indemnification provision was not implicated. The Court found this distinction unconvincing, and contrary to the plain language of the indemnification provision.
The Court distinguished indemnification provisions in the corporate context under DGCL § 145, from contractual provisions in an LLC Agreement. In the corporate context, a person is indemnified for liability due to acts made by reason of the fact that they were an officer, director, employee, or agent of the corporation. This was narrower than the LLC Agreement, which provided advancement “in connection with or arising out of or related to” the LLC Agreement, or the operations or affairs of the group of LLCs.
The Court was not sympathetic to the argument that the allegedly treacherous acts by the manager should prevent advancement – this was “precisely … the circumstance [where] advancement is critical.”